The FFI was launched in November 2008 to provide a simple, unbiased measure of how different stocks are fragmenting across primary markets and alternative venues.

In short, it shows the average number of venues you should visit in order to achieve best execution when completing an order. So an index of 1 means that the stock is still traded at one venue. Increases in the FFI indicate a fragmentation of trading across multiple venues and as such any firm wishing to effectively trade that security must be able to execute across more venues. Once a stock’s FFI exceeds 2 liquidity in that stock has fragmented to the extent that it no longer “belongs” to its originating venue.

Since its introduction the FFI has become the standard reference point for measuring how trading in a stock or index is spreading across different lit venues.

The FFI is defined as the inverse of the sum of the squares of the market shares of each individual trading venue: i.e. the inverse of (the average market share, weighted by market share).

As such, it can range from 1 to Vn moving from all trading residing on only one venue to an even amount of trading across Vn venues (where Vn is the number of venues trading the stock). Increases in the FFI indicate a fragmentation of trading across multiple venues and as such a firm wishing to effectively trade that security must be able to execute across more venues.

The FFI is calculated for the constituent stocks of the major indices in each region.

Stock Linking

In order to link stocks together across different trading venues the FFI references the ISIN code and currency to match each stock. This does have the effect of excluding fungible stocks but fungibility is different from liquidity. Given that many trading firms have very different and conflicting views on fungible stocks they are deliberately ignored by the index.

2. How is the FFI calculated?

The calculation of the FFI is the inverse of the Herfindahl Index. The Herfindahl index is a widely used measure of the size of firms in relationship to the industry and an indicator of the amount of competition among them.

The rationale behind taking the inverse of this value is that we are measuring a move away from the status quo of a single stock exchange with monopolistic hold on liquidity to a fragmented marketplace with a number of new trading venues taking market share; thus, the FFI will range from 1 (for a single execution venue) to Vn (where Vn is the total number of venues trading the stock).

Worked Example

The major benefit of the FFI in relation to other such measures is that it gives more weight to venues with the largest market share. Take, for instance, two cases in which the three largest venues trade 90% of the stock:

Case 1: All three venues trade 30% each, and

Case 2: One venue trades 70% while the other two trade 10% each.

We will assume that the remaining 10% of output is divided among 2 equally sized venues.

The Fidessa Fragmentation Index for these two situations makes the concentration of the liquidity in the second case strikingly clear:

The index involves taking the market share of the respective market venues, squaring it, adding them together and then taking the inverse.

A low index score (close to 1) indicates a stock is almost exclusively traded on a single venue. If all venues have an equal market share the index shows the number of venues trading the stock. When venues have unequal market shares, the index indicates the “equivalent” number of venues trading the stock.

3. How do you derive the venue market share figures?

The market share of each venue is calculated as the percentage of the total consideration traded by that venue over the total consideration traded by all the venues, in the supported indices.

(Please refer to the Fragulator® for more information on other world indices.)

For Europe, the USA, Canada and Japan only order book trades are included in the FFI calculations.

Fragulator®

1. What is the Fragulator?

The Fragulator was developed to give a complete picture of how trading in a given stock is broken down across lit venues, dark pools, systematic internalisers and bilateral off-book trades.

Using the Fragulator it’s possible to query several billion records from over 250 different sources to see how a given stock has been traded at a number of levels – by category and then by venue – and over any date range.

Feel free to use the Fragulator in any way you wish but we anticipate a number of important uses:

Assess broker performance:
Access the Fragulator to compare how a broker traded a stock compared with the overall trading patterns for that stock for the same time period.

Pre-trade analytics:
Use the Fragulator to analyse where to trade based upon the historical trading patterns for the stock in question

Correlation with other data:
Correlate the Fragulator with other data sources such as volatility or other macro information to make better decisions

2. How do I use the Fragulator?

To use the Fragulator simply type a stock code into the ‘Stock selector’ entry box. As you type, the Fragulator will give you suggestions for the stock you are typing. You can click on these suggestions if they find the one you are looking for. The suggestions will match on stock code, description or ISIN. You can also search for indices, countries and regions by clicking ‘other’ next to the Stock selector box. Once you have selected the required instrument, click on ‘’Submit’’ to get the trade breakdown for the last trading week.

3. Can I see more than last week’s data?

Yes, registered users can amend the start and end date fields by simply clicking on the field and selecting the required dates from the calendar. Note, the Fragulator will not allow a date range beyond a year, or dates in the future.
To register for a login simply click ‘Register’ at the top of the screen. You need only do this once (and it’s free).

4. Can I have access to the underlying trade data?

Yes, you can download one year’s historical data by clicking the ‘Download’ button. For any additional data requests, please email fragmentation.fidessa.com.

5. What are the trade categories?

‘LIT’ indicates trades executed on-book.
‘Dark’ indicates trades executed on a dark pool where the orders are not visible pre-trade.
‘SI’ indicates trades executed by a Systematic Internaliser.
‘Off-Book’ indicates trades executed over the counter and reported to one of the reporting venues.

6. What do all the trade types mean?

The trade type codes vary from one exchange to another, although there are some common ones:

AT – Automatic Trade, done on-book.
UT – Uncrossing Trade. These trades are normally part of an opening, closing or intra-day auction.
H – Hidden Order Trade. These trades result from a hidden order being executed.

a. See how fragmentation varies during the trading day as liquidity shifts across lit venues;
b. Discover which European venues benefit the most from the US market opening;
c. Check how SORs behave when the LSE goes into auction mode on the third Friday of the month;
d. Compare indices and stocks across different geographic regions;
e. Check how the market responds to venue outages and significant news events.

The trading activity chart shows the day’s activity for the top four lit venues plus the FFI value. Activity is measured in shares traded per minute, averaged over a 10 minute interval.

The Details table shows the total trading for each venue for the selected day.

2. How do I use the Fragulator Live?

To use the Fragulator Live type a stock (or index) code into the ‘Select Stock’ box and hit return.

3. Which stocks and venues are covered?

Frag Live supports a subset of stocks in Europe and Canada.

In Europe, we support all stocks which are traded on Chi-X, as well as the major European indices.

In Canada, we support the constituents of the TSX60 and TSX Composite indices, as well as the indices themselves.

Top of the Blocks

1. What is Top of the Blocks about?

MiFID II is going to reshape the way that participants trade off market. As a result of the caps on regular dark pool trading, a number of specialist block-matching facilities have emerged alongside existing venues to match orders in sizes at or above the Large in Scale (LIS) threshold. These venues operate conditional order types and so participants will need to choose carefully so as not to get overfilled or, worse still, miss unique liquidity opportunities. Top of the Blocks helps by comparing the most popular venues and showing how liquidity is spread across them.

2. Who is it for?

Buy-sides, brokers, venues, regulators and financial market commentators all want an independent view of where block trading is taking place.

Fidessa’s Top of the Blocks report analyses where blocks are trading across the specialist block-matching facilities and, most importantly, where the unique liquidity can be found.

3. Why is it useful?

Top of the Blocks helps you to understand:

market structure changes

where you should start your hunt for block liquidity

when to tweak your block algos

where unique liquidity can be found and how this pattern changes over time.

4. How often will it be published?

We plan to publish the report on a weekly basis so that it will also provide a useful record over time of where blocks in different shares can be best located. If you would like to be notified when the report is updated then click here.

5. What is the LIS threshold?

Under MiFID II, the thresholds are important to determine which trades are included in Dark Pool Caps. From the 3rd January 2018, the reports use the MiFID II thresholds below.

MiFID II thresholds

Average Daily Turnover (ADT) €

Minimum size of execution qualifying as large in scale €

ADT &LT; 50,000

15,000

15,000 ≤ ADT &LT; 100,000

30,000

100,000 ≤ ADT &LT; 500,000

60,000

500,000 ≤ ADT &LT; 1,000,000

100,000

1,000,000 ≤ ADT &LT; 5,000,000

200,000

5,000,000 ≤ ADT &LT; 25,000,000

300,000

25,000,000 ≤ ADT &LT; 50,000,000

400,000

50,000,000 ≤ ADT &LT; 100,000,000

500,000

ADT ≥ 100,000,000

650,000

Under MiFID I, the thresholds were important for trades that benefit from delayed publication. These applied up to the end of 2017.

MiFID I thresholds

Average Daily Turnover (ADT) €

Minimum size of execution qualifying as large in scale €

ADT &LT; 500,000

50,000

500,000 ≤ ADT &LT; 1,000,000

100,000

1,000,000 ≤ ADT &LT; 25,000,000

250,000

25,00,000 ≤ ADT &LT; 500,000,000

400,000

ADT ≥ 500,000,000

500,000

6. But doesn’t LIS refer to orders not trades?

Yes it does, but for this report we’re using the LIS threshold as a definition of a block trade. This is important because these trades are exempt from the dark pool caps.

7. Which trading venues are included in Top of the Blocks?

Cboe BXE and CXE Dark Order Books

Cboe Large in Scale service

Euronext Block

Instinet BlockMatch

Liquidnet

Posit

Turquoise Plato™

UBS MTF

We know that there are other venues that facilitate block trading and we plan to add these according to demand. If you think that your venue should be included then please contact the team.

8. Which shares are included?

The share universe for the report is taken from the ESMA Shares admitted to trading on EU Regulated Markets register.

9. Why are there so few Swiss shares?

The Swiss regulator does not contribute to the ESMA share data. Therefore the only Swiss shares present are those which are also listed on other MiFID regulated markets.

10. Which trades are included?

The report includes all trades larger than the MiFID I large in scale LIS threshold
on the selected venues.

11. Why does the count of dark trades differ from the Fragulator?

The Fragulator includes all dark trades, not just LIS trades.
We will address this in future versions.

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